Financial results Q2 & H1 FY2018/19. 2 November 2018

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Chad Ball
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1 Financial results Q2 & H1 FY2018/19 2 November 2018

2 Disclaimer The following presentation contains forward looking statements by the management of Singapore Post Limited ( SingPost ) relating to financial trends for future periods, compared to the results for previous periods. Some of the statements contained in this presentation that are not historical facts are statements of future expectations with respect to the financial conditions, results of operations and businesses, and related plans and objectives. Forward looking information is based on management's current views and assumptions including, but not limited to, prevailing economic and market conditions. These statements involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those in the statements as originally made. Such statements are not, and should not be construed as a representation as to future performance of SingPost. In particular, such targets should not be regarded as a forecast or projection of future performance of SingPost. It should be noted that the actual performance of SingPost may vary significantly from such statements. $ means Singapore dollars unless otherwise indicated. 1

3 Q2 & H1 FY2018/19 Financials Cash flow and Balance sheet Segmental results 2

Overview Q2 FY2018/19 Revenue S$368.7 +2.2% YoY million Profit on operating activities S$40.0 +33.

4 Overview Q2 FY2018/19 Revenue S$ % YoY million Profit on operating activities S$ % YoY million Underlying net profit Q2 interim dividend S$ % YoY million 0.5 cent per share same as last year Strong growth in profit on operating activities 3

5 Q2 FY2018/19 financial statement Q2 FY17/18 Q2 FY18/19 YoY % change Revenue % Operating expenses (333.0) (331.7) (0.4%) Profit on operating activities % Share of associated companies & JV 4.9 (3.6) N.M. Exceptional items 0.9 (2.9) N.M. Income tax expense (8.5) (9.3) +9.3% Net profit attributable to equity holders (12.9%) Underlying net profit % N.M. denotes Not Meaningful 4

6 Q2 FY2018/19 operating expenses Q2 FY17/18 Q2 FY18/19 YoY % change Volume-related (190.9) (200.2) +4.9% Labour & related (81.8) (76.8) (6.2%) Admin, selling & others (45.4) (40.4) (11.1%) Depreciation & amortisation (14.7) (14.3) (2.7%) Operating expenses (333.0) (331.7) (0.4%) 5

Highlights Q2 FY2018/19 Winning in our home market - strong increase in parcel volumes

of 21,100 in Q2 FY18/19 vs 15,200 in Q2 FY17/18 A specialist in logistics and fulfilment

Quantium Solutions narrowed losses significantly compared to last year.

to cost leadership - successful cost management initiatives Operating Expenses Revenue

7 Highlights Q2 FY2018/19 Winning in our home market - strong increase in parcel volumes Extract full value from investments Parcel sorting volumes +38% YoY Average daily volume of 21,100 in Q2 FY18/19 vs 15,200 in Q2 FY17/18 A specialist in logistics and fulfilment services in the Asia Pacific. Quantium Solutions narrowed losses significantly compared to last year. Capture global cross-border ecommerce flows - strengthening strategic collaboration Drive to cost leadership - successful cost management initiatives Operating Expenses Revenue Cainiao s further investment in 4PX will allow deeper business integration between 4PX, Alibaba Group and SingPost for cross-border ecommerce volumes 0.4% YoY 2.2% YoY 6 6

8 ecommerce-related revenue ecommerce-related as % of Group revenue 51.3% 51.3% Group Revenue ecommerce-related % Non-eCommerce related Q2 FY17/18 Q2 FY18/19 7

9 Q2 FY18/19 Underlying net profit movement Logistics profit 1 Property profit 1 Underlying net profit +0.4% Post & Parcel profit 1 Other items 2 ecommerce profit 1 Associates & JV Q2 Q2 FY17/18 Logistics Property Post & Parcel Others ecommerce Associates & JV 1. Profit on operating activities 2. Includes net finance expense, unallocated corporate overhead items, trade-related foreign currency differences, tax and non-controlling interests Q2 FY18/19 8

10 Cash flow & Balance sheet 9

11 Free cash flow H1 FY17/18 H1 FY18/19 Operating cash flow before capital charges Changes in working capital (29.3) (76.0) 1 Income tax paid (14.9) (17.3) Net cash provided by operating activities Capital expenditure (38.9) (18.8) Free cash flow 11.6 (7.0) 1. Due to timing difference in terms of outpayments made largely for international mail payables, while the receivables have not been collected as at 30 September Since the close of the period ended 30 September 2018, about $50 million in payments have been received. 10

12 Financial indicators Financial indicators As at Mar 2018 As at Sep 2018 Cash & cash equivalents at end of financial period Borrowings Net cash / (debt) position 70.1 (8.5) 1 H1 FY17/18 H1 FY18/19 EBITDA EBITDA 2 to interest expense (times) 17.4x 20.8x 1. Due to timing difference in terms of outpayments made largely for international mail payables, while the receivables have not been collected as at 30 September Since the close of the period ended 30 September 2018, about $50 million in payments have been received. 2. Excluding exceptional items 11

13 Segmental results 12

14 Segment revenue and profit on operating activities Revenue Profit on operating activities Property ecommerce Property Logistics Post and Parcel Post and Parcel Inter-segment elim (11.2) (9.7) Q2 FY17/18 Q2 FY18/19 Logistics ecommerce Others 1 (9.0) (3.4) (6.3) 0.3 (11.2) (4.5) Q2 FY17/18 Q2 FY18/19 1. Refer to unallocated corporate overhead items and trade-related foreign currency translation differences. 13

15 Post and Parcel Post and Parcel Q2 FY17/18 Q2 FY18/19 YoY % change H1 FY17/18 H1 FY18/19 YoY % change Revenue % % Domestic mail % (1.3%) SP Parcels (2.5%) % International mail % % Post office pdts and svcs (12.5%) (11.9%) Profit on operating activities % % OP margin 23.0% 23.8% 23.8% 23.1% Revenue rose 1.6% in Q2 and 3.6% in H1, as higher international mail revenue from cross-border ecommerce deliveries helped offset the impact of lower domestic letter mail volumes. However, profit on operating activities rose 5.1% in Q2 and 0.5% in H1, driven by higher margins from domestic last mile ecommerce-related deliveries in Singapore. The Group is starting to reap operating synergies from the ongoing integration of our last mile delivery capabilities in the post and parcel divisions. 1. Includes cross-border ecommerce items via transhipment 14 14

16 Logistics Logistics Q2 FY17/18 Q2 FY18/19 YoY % change H1 FY17/18 H1 FY18/19 YoY % change Revenue % (1.0%) Quantium Solutions (9.2%) (6.7%) CouriersPlease (0.8%) % Famous % (0.5%) Profit on operating activities (9.0) 0.3 N.M. (11.4) 0.4 N.M. OP margin (7.2%) 0.3% (4.6%) 0.2% Revenue rose slightly in Q2, driven by the freight forwarding business under Famous Holdings. This was offset by revenue decline at Quantium Solutions, which lost some customers amid an ongoing review of unfavourable customer contracts to improve profitability. The Logistics segment registered profit on operating activities of S$0.3 million in Q2 and S$0.4 million in H1, compared to operating losses last year, largely due to a reduction in losses at Quantium Solutions. N.M. denotes Not Meaningful 15 15

17 ecommerce ecommerce Q2 FY17/18 Q2 FY18/19 YoY % change H1 FY17/18 H1 FY18/19 YoY % change Revenue (0.5%) (2.4%) Profit on operating activities (3.4) (11.2) (227.0%) (8.2) (20.5) (149.5%) OP margin (6.3%) (20.7%) (7.3%) (18.8%) Revenue declined 0.5% in Q2 and 2.4% in H1. The US businesses were impacted by pricing pressures due to competitive intensity. Operating losses rose to S$11.2 million in Q2 and S$20.5 million in H1, largely due to the US Businesses. The pricing pressures had led to certain customer contracts being renewed at lower rates. This was exacerbated by an increase in costs due to ongoing initiatives to integrate TradeGlobal and Jagged Peak, as well as investments in automation

18 Property Property Q2 FY17/18 Q2 FY18/19 YoY % change H1 FY17/18 H1 FY18/19 YoY % change Revenue % % Profit on operating activities % % OP margin 46.6% 59.5% 46.5% 58.9% Property segment revenue, which comprises commercial property rental and revenue from the self-storage business, rose 20.7% in Q2 and 26.5% in H1 due largely to the SingPost Centre retail mall which re-opened in October 2017 after a period of redevelopment. Committed occupancy for the mall improved to 99.1% as at 30 September 2018, from 96.7% as at 30 June

19 Thank You

20 Supplementary information

21 H1 FY2018/19 financial statement H1 FY17/18 H1 FY18/19 YoY % change Revenue % Operating expenses (656.2) (665.4) +1.4% Profit on operating activities % Share of associated companies & JV 2.1 (7.1) N.M. Exceptional items 4.9 (8.9) N.M. Income tax expense (16.8) (20.9) +24.0% Net profit attributable to equity holders (27.2%) Underlying net profit (4.6%) N.M. denotes Not Meaningful 20

22 H1 FY2018/19 operating expenses H1 FY17/18 H1 FY18/19 YoY % change Volume-related (379.6) (400.6) +5.5% Labour & related (164.6) (155.0) (5.8%) Admin, selling & others (83.2) (81.1) (2.4%) Depreciation & amortisation (28.9) (28.7) (0.6%) Operating expenses (656.2) (665.4) 1.4% 21

23 Segment revenue and profit on operating activities Revenue Profit on operating activities Property ecommerce Property Logistics Post and Parcel Post and Parcel Inter-segment elim (24.5) (21.3) Logistics ecommerce Others (11.4) (8.2) (20.5) (11.6) (11.1) H1 FY17/18 H1 FY18/19 H1 FY17/18 H1 FY18/19 1. Refer to unallocated corporate overhead items and trade-related foreign currency translation differences. 22

24 H1 FY18/19 Underlying net profit movement Logistics profit 1 Property profit 1 Underlying net profit -4.6% Post & Parcel profit 1 ecommerce profit Associates & JV Other items H1 H1 FY17/18 Logistics Property Post & Parcel ecommerce Associates & JV Others 1. Profit on operating activities 2. Includes net finance expense, unallocated corporate overhead items, trade-related foreign currency differences, tax and non-controlling interests H1 FY18/19 23

25 Exceptional items Q2 FY17/18 Q2 FY18/19 YoY % change H1 FY17/18 H1 FY18/19 YoY % change Losses on disposal of PPE (76) (67) 11.8% (15) (43) (186.7%) Professional fees (764) (138) 81.9% (1,482) (166) 88.8% Fair value gain / (loss) on warrants from an associated company Provision for restructuring of operation 1,730 (2,739) N.M. 7,405 (8,697) N.M (991) - N.M. Exceptional items 890 (2,944) N.M. 4,917 (8,906) N.M. 24

Our Strategy A Win in our home market B Ignite future growth engines C Extract full value from investments Gain leading share in Parcels Drive scale of ecommerce warehouse and fulfillment Accelerate

26 Our Strategy A Win in our home market B Ignite future growth engines C Extract full value from investments Gain leading share in Parcels Drive scale of ecommerce warehouse and fulfillment Accelerate urban solutions for a Smart Nation Mitigate mail decline through innovative digital solutions Drive Southeast Asia with end-to-end capabilities Capture global crossborder ecommerce flows Maximise value from international subsidiaries and associates Turnaround TradeGlobal and scale combined US businesses D Drive to cost leadership Optimise cost position Drive productivity, reduce non-conformance Instill continuous improvement 25

26 th Annual General Meeting 11 July 2018

26 th Annual General Meeting 11 July 2018 Agenda FY2017/18 Financials Cash flow and Balance sheet Highlights Summary The following presentation contains forward looking statements by the management of